giteshccl

@giteshccl · 27 Dec 2024

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FCRA Compliance Checklist for NGOs

The
Foreign Contribution (Regulation) Act (FCRA) in India is a grave narrow
framework that governs the acceptance and use of foreign contributions by NGOs
and other entities. This checklist aims to provide an inclusive guide to help
NGOs certify compliance with FCRA requirements. Adherence to these guidelines
not only helps maintain the legal standing of the organization but also builds
credibility and trust among donors and stakeholders.

1. Registration and Renewal

• FCRA Registration: NGOs must obtain FCRA
  registration to accept foreign contributions. The application is made
  online on the FCRA portal with Form FC-3A.



• Validity Period: FCRA registration is valid
  for five years. Timely renewal must be initiated six months before the
  expiry of the registration.



• Provisional Registration: New NGOs can apply for
  provisional registration, which is valid for five years or until permanent
  registration is obtained.

2. Designated Bank Account

• Exclusive Account: Open a dedicated
  FCRA-designated bank account in a branch specified by the Government
  (currently SBI, New Delhi Main Branch) to receive foreign contributions.



• Subsequent Accounts: NGOs can open additional
  bank accounts for shifting funds but must inform the Ministry of Home
  Affairs (MHA).



• Regular Monitoring: Warrant proper monitoring
  of transactions in the FCRA account to avoid unapproved usage of funds.

3. Permitted and Prohibited Activities

• Permissible Use: Foreign helps must only be
  used for the specific purpose mentioned during registration, such as
  social, cultural, educational, or religious activities.



• Prohibited Use: Funds must not be used for
  speculative purposes, personal gains, or political activities.
  Sub-granting of funds to unregistered NGOs is strictly prohibited.

4. Filing Annual Returns

• Mandatory Returns: File an annual return
  using Form FC-4 by December 31st of the financial year for the preceding
  year.



• Documentation: Include income and
  expenditure statements, receipts, payment accounts, and a balance sheet
  certified by a Chartered Accountant (CA).



• Online Submission: Returns must be submitted
  online through the FCRA portal, and physical copies are not accepted.



• Zero Contributions: Even if no foreign
  contributions are received in a financial year, NGOs must file a ‘Nil’
  return.

5. Reporting Changes

• Key Changes: Notify the FCRA Department
  about changes in the organization's name, address, governing members, or
  bank account details within 15 days of the change.



• Amendment Application: Use Form FC-6 for
  reporting changes and update relevant documents.



• Prior Approval for Funders: NGOs must obtain prior
  approval from the MHA if there is a change in funding sources or project
  scope.

6. Record Maintenance

• Detailed Records: Maintain true and full
  records of all foreign contributions, including receipts, use, and
  purpose.



• Supporting Documents: Keep supporting documents
  such as invoices, bills, agreements, and vouchers to verify expenditures.



• Retention Period: Preserve records for at
  least six years for audit and proof purposes.

7. Compliance with Utilization Norms

• Utilization Timeline: Warrant that funds are used
  within the specified project timeline. Unspent balances should be carried
  forward or returned as per FCRA guidelines.



• Administrative Expenses: Limit clerical expenses to
  20% of the total foreign contribution unless prior approval is obtained.



• Investment Restrictions: Funds must not be used for
  dicey investments or activities outside the organization's objectives.

8. Prior Approval for Specific Contributions

• Prior Permission: NGOs without FCRA
  registration can accept foreign contributions on a case-by-case basis with
  prior approval from the MHA using Form FC-3B.



• Application Requirements: Run details about the
  donor, purpose, and intended utilization of the funds.

9. Adherence to Audits and Inspections

• Annual Audit: Appoint a qualified
  Chartered Accountant to conduct an annual audit of FCRA transactions and
  prepare audited financial statements.



• Inspection Readiness: Certify readiness for
  inspections by FCRA authorities by maintaining transparent and updated
  records.



• Response to Queries: Respond promptly to any
  notices or queries from the MHA.

10. Penalties and Consequences

• Penalties for Non-Compliance: Be aware that
  non-compliance can lead to penalties, including monetary fines,
  suspension, or cancellation of FCRA registration.



• Voluntary Surrender: If unable to comply with
  FCRA regulations, NGOs can voluntarily surrender their registration.

11. Stakeholder Awareness

• Training and Orientation: Conduct regular training
  sessions for staff and board members to warrant awareness of FCRA
  compliance requirements.



• Consultation with Experts: Seek advice from legal and
  financial experts specializing in FCRA compliance.

12. Staying Updated

• Policy Changes: Stay informed about
  amendments or updates to FCRA regulations by regularly checking
  notifications on the MHA website.



• Workshops and Seminars: Participate in seminars
  and workshops on regulatory compliance to enrich organizational capacity.

13. Conflict of Interest Policy

• Transparency: Avoid conflicts of
  interest by warranting that governing members do not directly benefit from
  foreign contributions.



• Clear Policies: Implement internal
  policies to manage conflicts and certify unbiased decision-making.

14. Restrictions during Suspension

• Suspension Impact: Understand that during
  suspension, NGOs cannot receive or utilize foreign contributions without
  MHA approval.



• Mitigation Measures: Take corrective actions to
  address the causes of suspension promptly.

15. Ethical Fundraising Practices

• Transparency with Donors: Clearly communicate the
  purpose and utilization of foreign contributions to donors.



• Avoid Misrepresentation: Certify that fundraising
  practices align with ethical standards and do not mislead donors.

Close

Maintaining
FCRA compliance is essential for the effective and lawful functioning of NGOs
that rely on foreign contributions. By following this checklist, NGOs can
streamline their compliance processes, minimize risks of penalties, and focus
on achieving their organizational objectives. Regular reviews and proactive
measures will help certify adherence to FCRA regulations and foster trust among
stakeholders.